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Memorandum of Association &

Articles of Association
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Memorandum of Association

The first step is the formation of a company is

to prepare memorandum of association. This
is also known as constitution of the company.
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What is Memorandum of Association of

a company?
• Is the constitution or charter of the company
and contains the powers of the company. No
company can be registered under the Companies
Act, 2013 without the memorandum of
association. Under Section 2(56) of the
Companies Act, 2013 the “memorandum”
means the memorandum of association of a
company as originally framed or as altered from
time to time in pursuance (effect) of any previous
company law or of this Act;
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CONTENTS OF MEMORANDUM OF
ASSOCIATION

Six Clauses
Name Registered
Objects
office

Association
Liability Capital or subscription
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1. Name Clause
• The memorandum must state the name of the
company with ‘limited ‘ as the word ,in case of a
public limited company and with ‘private
limited', in the case of a private limited company
• the company is free to choose any name but it
must not be undesirable or must not resemble
the name of any other registered company.
• i.e. President, Prime Minister, Govt. etc
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2.Registered office clause [section 13(1)(b)]

• The state in which the registered office of a
company will be situated is mentioned in this
clause
• The registered office of the company is the
official address of the company where the
statutory books and records must normally be
kept
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3. Object Clause section 13(1)(c)&(b)]

This clause is quite important and must be very carefully
drafted as it determines the activities of the company. In
the object clause each and every detail of activities of the
business to be carried out must be laid down.
 Main object:- this sub-clause contains the main objects
of the company to the pursued on its incorporation
 Objects incidental or ancillary :- it covers
objects which are incidental or ancillary to the
attainment of the main object the
 Other objects :- this sub-clause will cover any
objects which are not included in the ‘main objects ‘
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4. Liability Clause[section 13(2)]

 This clause states the nature of liability of the members of
the company
 In the case of a company limited by share or by guarantee the
fact that the liability of its members is limited must be made
absolutely clear . In case of a company limited by shares the
liability of a member is limited to the nominal value of the
share held by him
 If the share are fully paid up his liability is nil. But in
case of partly paid-up shares the liability is limited to
the amount which is unpaid.
 In case of a company limited by guarantee, the liability clause
must state the amount which every member undertakes to
contribute to the assets of the company in the event of its
winding up
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5. Capital Clause[section 13(4)(a)]

• This clause states that amount of the capital with
which the company is to be registered
• This clause should also state the number and
face value of shares into which the capital of the
company is divided
• The capital with which the company is
‘registered’ or ‘nominal’ or ‘authorized’
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6. Association clause [section 13(4)

(c)]
• The association clause states – in this cause , the
subscribes declare that they desire to be formed
into a company and agree to take the shares
stated against their names.
• The names, address and occupation of the
subscribers must be given each subscriber must
sign in the presence of at least
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ALTERATION OF NAME CLAUSE

• Special Resolution.
• Written Approval of Central Government.
• No Approval of Central Government is
necessary if the change of name involves only
the addition or deletion of the word “Private”.
• Change by ordinary resolution and approval of
Central Government when name is identical or
too closely resembles the name of an existing
company.
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CHANGE OF REGISTERED OFFICE

From one premises to another premises in

the same city, town or village

• By passing a resolution of Board of Directors

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CHANGE OF REGISTERED OFFICE

From one town or city or village to another town

or city or village in the same state
1. Special Resolution.
2. Confirmation of Regional Director — when
jurisdiction of Registrar of companies is
changed.
3. Copy of (i) & (ii) to be filed with ROC.
4. Notice of new location to ROC within 30
days.
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CHANGE OF REGISTERED OFFICE

From one state to another state

1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only

(As given in section 17)

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ALTERATION OF OBJECTS CLAUSE

A. Special Resolution
B. Alteration is sought on any of these grounds:
• To carry on its business more economically &
more
efficiently
• To attain its main purpose by new or improved means
• To enlarge or change the local area of its operations
• To carry on some business which under existing
circumstances may conveniently or advantageously be
combined with the business of the company
• To restrict or abandon any of the objects specified in the
memorandum
• To sell or dispose off the whole or any part of the
undertaking
• To amalgamate with any other company
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ALTERATION OF LIABILITY CLAUSE

• The liability of a member of a company cannot

be increased unless the member agrees in
writing.

• From unlimited liability, it can be made limited

by re-registration of the company.
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ALTERATION OF CAPITAL CLAUSE

• A company can reduce share capital by first passing a special

resolution for reduction of capital but powers to reduce
share capital must be guaranteed in the articles of the
company, otherwise the share capital can be altered by
special resolution giving such powers.
• The company can apply to the court by petition for getting
confirmation from the court for reducing the share capital .
The main duty of the court is to look after the interest of the
creditors and different classes of shareholders, and then
decide whether the company should be allowed to reduce
share capital .
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DOCTRINE OF ‘ULTRA VIRES’

The words :
• Ultra means beyond
• Vires means the powers
• Ultra Vires means beyond the powers

A company which owes its incorporation to statutory

authority cannot effectively do anything beyond the
powers expressly or impliedly conferred upon it by the
statute or Memorandum of Association.
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Articles Of Association
• A document that specifies the regulations for a
company's operations. The articles of association
define the company's purpose and lays out
how
tasks are to be accomplished within the
organization, including the process
appointing directors and how financial
for
records will be handled.
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Items covered by the Articles of

Association include :-
• Adoption of preliminary contracts.
• Number and value of shares
• Allotment of shares
• Calls on shares
• Transfer of shares
• Forfeiture, reissue, surrender of shares
• Alteration of share capital
• Share certificates
• Conversion of shares into stocks
• Meetings and proceedings
• Voting rights, proxies and polls
• Appointment , Remuneration, etc of Directors
• Borrowing powers
• Dividend and Reserves
• Accounts and audit
• Procedure of winding up
• Seal of the company
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Arun Verma (c)

Companies which must have Articles

• Unlimited Companies:
▫ The Articles of such a company must
state:
 Total number of members; and
 Share capital.
• Companies limited by
Guarantee:
▫ Articles of such company must state
total number of members.
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Arun Verma (c)

Companies which must have Articles

…contd.
• Private Companies limited by shares:
▫ must include requirements of
Section 3(1)(iii).
No Article Company
• A public limited company having share
capital may be registered without
Articles.
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Doctrine Of Ultra Vires

• Ultra vires to the articles of association
• Ultra vires the memorandum of Association
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Alteration of Articles
• Articles may be altered by a company by
passing special resolution at a general body
meeting of shareholders
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Arun Verma (c)

Doctrine of Constructive Notice

• According to Section 610, every person
dealing with the company is deemed to have
read M/A and A/A and understood the
contents thereof in the correct perspective.
• Doctrine of Indoor
Management

• Rule of Indoor Management is an exception

to the Doctrine of Constructive notice.
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Memorandum of Association Articles of Association

Charter of Company Regulations for internal management

Defines the scope of the activities Rules for carrying out the objects of
company.

Supreme document Subordinate to the memorandum.

Must for every company Company limited by shares need not

have it (Table ‘A’ applies)

Strict restrictions, alteration only with Can be altered by special resolution.

sanction of central govt./ tribunal.

It define the relationship between the It define the relationship between

company & the outsiders company & its staff and between
members & members interests